Commentary:

After beginning the day slightly lower on the open, stocks reversed and grinded higher yesterday morning, but ran out of gas in the afternoon. In the latter half of the day, the major indices merely oscillated in a sideways range before finishing the session with mixed results. The Nasdaq Composite eked out a gain of 0.2%, but the Dow Jones Industrial Average was lower by the same percentage. The benchmark S&P 500 Index slipped 0.1%. The small-cap Russell 2000 lost 0.5%, but the S&P Midcap 400 edged 0.1% higher. Showing a bit of indecision into the close, the S&P and Nasdaq finished near the middle of their intraday ranges. The Dow settled in the bottom third of the day’s range.

Like the prices of the major indices, turnover was also mixed. Total volume in the NYSE eased 18%, but volume in the Nasdaq rose 7% above the previous day’s level. The higher volume in the Nasdaq enabled the index to score its second straight “accumulation day,” indicative of institutional buying. Trading in the Nasdaq also moved back above its 50-day average level.

As the S&P 500 tests key resistance of the upper channel of its four-month trading range, the iPath S&P 500 VIX Mid-term Futures (VXZ) has come into major support of the lower channel of its multi-month “pennant” formation. This is shown on the daily chart of the VXZ below:

Because VXZ is at such a major area of support, it may be a positive reward-risk ratio to consider buying this ETF near its current price, while keeping a protective stop about 3% below the September 14 low. Since this ETF is correlated to the CBOE Volatility Index (the “fear index”), which frequently moves in the opposite direction of the broad market, VXZ may be an ideal ETF for traders looking for a bit a bearish exposure to add to their portfolios, or for those who want a bearish position, but are unable or unwilling to initiate an actual short position on the broad market.

In yesterday’s commentary, we pointed out a potential short sale set up in SPDR Gold Trust (GLD). Specifically, we were targeting GLD for short entry only if it broke down below support of its three-day low, as well as its 20 day exponential moving average. We then followed up by saying, “Perhaps most important about this setup is the importance of not ‘jumping the gun’ with a pre-mature entry point before GLD actually breaks down below its three-day low. Since GLD is still pretty near its high, it would only take one day of solid gains for the ETF to zoom back up.” Zooming back up is exactly what happened yesterday, as GLD surged higher, breaking out to close a fresh all-time high, rather than following through to the downside. This is a good example of why we continually emphasize the importance of not “jumping the gun” with any of our trade setups. Although GLD was a setup we are considering for short entry, it never not met our criteria for the trigger price, so there was absolutely no harm done.

In the September 10 issue of The Wagner Daily, we pointed out a potential breakout play in iShares Xinhua China 25 Index (FXI). Specifically, we were anticipating a breakout above resistance of the weekly downtrend line that has been in place for the past ten months. Now, FXI is testing resistance of that pivotal downtrend line, and a rally above the September 14 high could generate extensive bullish momentum in the near to intermediate-term. The setup is shown on the weekly chart of FXI below:

In yesterday’s Wagner Daily, we explained why the major indices were at pivotal levels, and clearly summarized the technical state of the broad market with this chart of the S&P 500 SPDR (SPY):

Since the major indices were basically flat yesterday, the situation above remains the same going into today. As we said yesterday, “Over the next few days, traders’ eyes will be on this pivotal area of resistance, just above yesterday’s (September 13) high. This could lead to higher than usual volatility, along with a tug-of-war, as the bulls and bears battle for dominance at this pivotal resistance level in the broad market.” Rather than placing big bets on the market right now, consider laying low for a few days while the market makes up its mind. When it clearly shows it hand, there will be plenty of time to take advantage of the next dominant trend.

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Today’s Watchlist:

There are no new setups in the pre-market today. If we enter any new trades today, we will promptly send an Intraday Trade Alert with details.

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Daily Performance Report:

Below is an overview of all open positions, as well as a performance report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on the $50,000 Wagner Daily model account size. Changes to open positions since the previous report are listed in red text below. Please review the Wagner Daily Subscriber Guide for important, automatic rules on trigger and stop prices.

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Notes:

• Per Intraday Trade Alert, we made a judgment call to take profits on DBA, selling into strength of yesterday’s gain for a profit of nearly $1,000.
• UUP hit our stop yesterday, after failing to hold support of its 200 day moving average and the gap-up low of August 11. However, because we trailed the stop higher after it moved into the money a bit, our loss was small.
• Stop in TUR has been raised again; playing it tight to lock in a decent profit if market reverses at resistance here.
• Reminder to subscribers – Intraday Trade Alerts to your e-mail and/or mobile phone are normally only sent to indicate a CHANGE to the pre-market plan that is detailed in each morning’s Wagner Daily. We sometimes send a courtesy alert just to confirm action that was already detailed in the pre-market newsletter, but this is not always the case. If no alert is received to the contrary, one should always assume we’re honoring all stops and trigger prices listed in each morning’s Wagner Daily. But whenever CHANGES to the pre-market stops or trigger prices are necessary, alerts are sent on an AS-NEEDED basis. Just a reminder of the purpose of Intraday Trade Alerts.
• For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to support@morpheustrading.com if not already set up for this value-added feature we provide to subscribers.

Edited by Deron Wagner,
MTG Founder and
Head Trader